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Carpetright's profit falls 1.5m in first half

Carpetright is hoping for a smoother second half after difficult trading in the UK and the Netherlands led to a fall in profits.

Britain’s biggest floor coverings retailer had issued a profit warning in October, blaming a softer market in Britain and a further deterioration in Holland.

Carpetright said today that underlying pre-tax profit fell £1.5 million to £3 million for the six months to October 26, with the statutory figure coming in at £1.9 million, compared with a £7.9 million loss in the same period last year.

Group revenue fell 2.2 per cent to £222.2 million, with like-for-like sales in the UK down 0.8 per cent and off 8.6 per cent in its Europe division, which included the Netherlands, Belgium and Ireland.
The retailer has 474 stores in Britain and another 142 in those countries. Carpetright continued its store modernisation programme, refurbishing another 38 outlets in the period to bring the total to 224.

Lord Harris of Peckham, executive chairman of Carpetright, said: “Against a backdrop of volatile trading conditions, our first half performance reflects an improvement in profits in the UK, driven by the continued success of our self-help initiatives, offset by a move into loss in our rest of Europe business.”

The 71-year-old founder of the company stepped back into a full-time executive role in October after Darren Shapland departed as chief executive.

Although he anticipated that trading conditions would remain challenging, Lord Harris expected an improvement in group performance in the second half as the number of mortgage approvals continued to rise.

“Historically, the trend in UK mortgage approvals has been a useful lead indicator of consumer demand in our sector, bearing a positive correlation with floor covering sales,” he said. “Approvals began to show encouraging signs of improvement during the first half, although this is from a very low base by historic standards. In the past, we have seen a lag of around six months before the impact of a change in the mortgage approval trend has been reflected in our sales.”

Full-year expectations remain unchanged and no dividend will be paid.

Shares in Carpetright, which have fallen 22 per cent so far this year, were trading down 2.5p to 530p during the morning session, valuing the business at £358 million.

Keith Bowman, a Hargreaves Lansdown analyst, said that today’s results provided tangible relief given October’s profit warning. “Management remains hopeful that the upturn in the UK housing market will eventually lift sales, while self-help initiatives in both the UK and Europe are being hotly pursued. For now, and despite the recent hit to investor sentiment, some confidence may be returning, with analyst opinion potentially lifting from the current sell consensus,” he said.

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Source : Chris Johnston - The Times

10 December 2013
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